Have a Tax Question? Ask a Tax Expert
Unfortunately I should admit that most people get into timeshare trap while they do not really need a timeshare.
As you became an owner of the property - you have responsibility for taxes, insurance, maintenance, etc - all these expenses are based on the fact of your ownership.
In additional - as you likely did not pay cash for the timeshare - you took a loan - thus you entered into relation with financial company or a bank that legally unrelated to the development company that sold you the timeshare. So you took responsibility to pay the loan back.
It is likely that you purchased the timeshare from development company which built the property, but in additional you are in contract with another company which manages the property.
It is not clear to whom you "agreed to deed back the property" - it is likely not the company from which the property was purchased - so it is not really "back". The fair market value of the timeshare is likely less than the amount you owe.
The bank might agree to forgive you the loan as part of the transaction - so you will not owe anything after that. Is -so - the bank will issue the form 1099C - http://www.irs.gov/pub/irs-pdf/f1099c.pdf that would make forgiven amount deemed your taxable income.
You should look at the box 2 - that amount is considered your income and in general is taxable. However there are some exemptions. If you was insolvent at the time of cancellation - you need to file a form 982 - to proof your insolvency - and may not include all or part of canceled dent into taxable income.
Please see the IRS Publication 908 Bankruptcy Tax Guide - http://www.irs.gov/pub/irs-pdf/p908.pdf - with example of the form 982 on the last page.
The bank which canceled the debt would report the whole amount to the person listed first on the mortgage. On the form 1099C at the box 2 should be listed $15,000.
If the bank issued two forms 1099C for each of you and for double amount - that is a mistake and you should contact the issuer asking to correct it.
The timeshare sales people are experts in their area, they touch your emotions and pressure you that you may think you are passing up on a deal that you will never be able to get again. Sometimes there are people in the group who act as they are buying timeshare - indeed they are part of the team which you are dealing with..
Timeshares are generally regulated through by the state law where the timeshare property is located - so if you feel that some type of fraud has been committed in regard to your timeshare, you may file a complaint.
However in most situations - you sign a contract to which you are legally bounded - in reality there are three contracts:
Assuming you was in sound mind at the time of signing - you have legal obligation to fulfill all these contracts.
If you get into foreclosure - and the property will be taken away - there will be additional legal cost. And you still have mortgage obligations and either the bank will try to collect debt from you or forgive the loan that will be taxable.
You always should consult with the lawyer before making such important decision, but you need to consider the cost pf a legal consultation as well. Most attorneys offer the first consultation free - please be sure to ask.